Pros: A considerably cheaper, smaller, and lighter version of Apple’s living room video solution, refocused primarily on video streaming while retaining the music and photo streaming capabilities of its predecessor. Streamlined menu system takes most of the best features from 2009’s Apple TV software update, adding support for Netflix subscription video streaming, as well as AirPlay media streaming from iOS 4.2 devices. New video rental catalog includes not only previously released movies and TV shows, but also a small number of films currently in or about to be released in theaters. Capable of playing purchased and rented content from an iTunes library, and from other Apple TV devices. Runs cooler and quieter than prior model.

Cons: No space for long-term user storage/synchronization of media, resulting in removal of direct-to-device media purchasing in favor of pure rental and streaming. Now has exceptionally limited TV show rental catalog; major TV studios have signaled that they will not rent content on iTunes, and some movie studios have forced 30 day waits after DVD releases for iTunes Store rentals, as well. Support for movie and TV features is even more limited outside of the United States. Remote application is imprecise due to gesture controls and can be laggy. Future expandability remains uncertain due to limited storage space and lack of App Store commitment from Apple.

When Apple first previewed “iTV”—the original name for Apple TV—at an event in late 2006, it was presenting its vision for what came to be described as a “ten-foot experience” alternative to the then-dominant iPod, a device with many overlapping features but a very different screen. Apple didn’t want to provide a nice TV menu system for docked iPods, which would have been great; instead, it wanted iPod users to buy a separate product that could sit next to their televisions—high-end televisions, only—and hold its own library of content. So the company’s engineers stuffed a stripped-down Macintosh into a smaller but still attractive $299-$399 shell, taking aesthetic cues from the nearly two-year-old, $499 Mac mini rather than building a plain black box that looked like most generic home AV equipment.

Though Apple has rightfully been criticized for limiting both the hardware and software potential of the first Apple TV, it got a lot right in that device’s industrial design. The original model was a 7.75” rounded square aluminum frame with white and gray plastics on its 1.2” tall top and bottom—as small as such a device could be back then given the Mac-like components inside, and a seemingly prestigious addition to any home entertainment center. In actual use, the original component-stuffed Apple TV ran hot to the touch, and some users had problems running it in warm environments, but it didn’t show dust and looked nice with silver and clear-bezeled TVs that were somewhat popular at the time.

Due in part to the $99 price tag, and also to the replacement of Mac parts with iPod ones, the new Apple TV goes in a different direction: cheap and as invisible as possible. At roughly a quarter the size of its predecessor—3.9” square and 0.9” tall, a space reduction made possible by ditching the hard drive and Mac-like motherboard—you can fit four new Apple TVs side by side on top of the old unit, and they’re shorter, too. Apple now makes the Apple TV from a mix of matte and glossy black plastics, capable of blending into mostly black home AV centers. The flat top features only an Apple TV logo, and the rubber concave bottom has an Apple logo similarly centered; apart from the glossy logos, both surfaces are primarily matte, while the rest of the shell is entirely glossy. It’s 75% lighter, too, at 0.6 pounds versus the 2.4 pound original model. Though it shows dust in a way its predecessor didn’t, it doesn’t stand out as much due to its smaller footprint.

Inside the new Apple TV is Apple’s A4 processor, the same chip that powers the iPod touch 4G, iPhone 4, and iPad, along with an iPod touch- and iPad-like 256MB of work RAM—half what’s in the iPhone 4—plus a modest 8GB of flash storage capacity, reserved solely for caching multiple streamed files at once. Unlike most of Apple’s devices, the new Apple TV doesn’t offer users any ability to manage this space, and the company doesn’t even advertise it as being there, lest people expect that they’ll be able to stuff it with synchronized music, videos, or apps of their choosing. It’s now basically silent since there’s no hard disk running inside, and since there’s more than enough room for the new model’s pocket-friendly A4 processor to breathe, it doesn’t get hot. But it is ever so slightly warm to the touch, possibly because Apple has again placed the power supply inside the chassis. Once again, Apple provides the power cord; you still have to provide the audio and video cables on your own for approximately $15-$20.

As with almost everything else in this model, connectivity options have been cut down from the first-generation Apple TV. In 2007, high-definition televisions and particularly combined audio and video HDMI ports were still in a state of slow adoption, so Apple pitched the Apple TV as compatible with not just HDTVs but also less common “enhanced-definition” models, as well as many HD sets that only had component video ports. Today, big HDTVs are cheap and HDMI ports are common, so the second-generation Apple TV does away with the component audio/video ports, preserving only the HDMI combined AV output and optical audio output of the last model. This change alone enabled Apple to save a considerable amount of space on the unit’s back—the five component AV ports previously took up more space than all of the other connectors combined—but it means that you’re out of luck if your TV doesn’t have a spare or shared HDMI port, or just wanted analog stereo output to inexpensive speakers.

There’s still a port for the included wall power cable, which is now black, a purely optional Ethernet port for wired Internet access through a nearby router, and a Micro-USB port—smaller than last model’s full-sized USB port, though still designed by Apple solely to be used for service, and now capable of connecting to iTunes for software restores if necessary. As before, Apple TV is still primarily designed to be controlled and accessed wirelessly, with an Infrared sensor hidden on the front and an 802.11n wireless networking chip inside. The Wi-Fi hardware supports older 802.11a, b, and g computers and networks, but it may stutter with them when playing back video, particularly high-definition video, as well as taking longer to buffer enough content to perform without interruption.

Unlike the 2007 model, however, which always had “just sync it overnight” as an alternative for users with outdated home networks, streaming reliability may matter more to some users of the second-generation Apple TV. Previously, Apple used a hard drive to store any portion of your iTunes library that you wanted to access immediately from your television, with streaming and buffering as fall-back options for content that wasn’t synced. Syncing was unquestionably a hassle—time-consuming and confusing for average users despite Apple’s near-best efforts to automate and streamline the process—so its elimination is a mixed blessing. There’s no need to bother loading up the new Apple TV with content of your own, but no ability to do so if you want to, either, so if your home network isn’t up to the task of streaming, the new Apple TV isn’t for you.

One conspicuous improvement in the second-generation Apple TV package is the remote control. Apple now includes the aluminum Infrared Apple Remote that mysteriously debuted as a $19 accessory late last year, rather than the 2005-vintage white and black plastic version that was packed in with prior models. Measuring roughly 4.75” long by 1 1/8” wide by 0.2” thick, the aluminum remote is actually longer than the new Apple TV itself, requiring Apple to squeeze it diagonally into the otherwise device-hugging white cardboard package.

This time, the remote features 7 total buttons, up from 6 on the white and black plastic original remote, with dedicated buttons for up, down, left, right, Select, Menu, and Play/Pause. While it’s easy enough to figure out, feels good in the hand, and proves very responsive to button presses, the remote is a far less than ideal tool for navigating through long lists or entering text on the screen. Like virtually all Infrared remotes, this one requires you to point it in a direct line of sight from the Apple TV, and operates at a nominal distance of 30 feet. A compartment on the back can be opened with a large coin to replace the standard CR2032 battery inside, something that shouldn’t be necessary more than once every two or so years.

As with the prior model, a free App Store application called Remote is also available if you want to use the iPod touch, iPhone, or iPad as an alternate controller, freeing you from line-of-sight control except to the extent that you will need to look at the TV screen to navigate the Apple TV’s menus. Remote was just updated for the iPad and Retina Display iPhone 4/iPod touch 4G models this week, adding second-generation Apple TV support while preserving the useful on-screen keyboard, and the underintuitive gesture-based Apple TV menu navigation feature found in earlier versions of the software. When used with iOS 4.x devices, Remote benefits from fast app switching and multitasking support, so you can easily switch over to it and then back again as necessary, however, we found that it lagged behind when we tried to use it for gesture-based control of the Apple TV, sometimes overshooting our intended selections, and at other times seeming not to recognize them. Performance will depend a lot on the way your network is set up, however; ours uses a dual-band Apple router with iOS devices on one band and the Apple TVs on the other.

Other elements of the Apple TV experience remain largely unchanged, so connecting and using it is fairly simple; the box includes an unusually long Setup Guide that walks through the entire process from start to finish, but won’t be necessary for the types of users who are most likely to purchase this device right now. In short, the new Apple TV requires a 720p-capable HDTV as a display device for its content, an iTunes Store account if you want to rent videos or TV shows, and iTunes 10 if you want to stream content directly from your computer to the device. We discuss the Apple TV interface and interactions with iTunes 10 in the next sections of this review.

Editors' Note: iLounge only reviews products in "final" form, but many companies now change their offerings - sometimes several times - after our reviews have been published.
This iLounge article provides more information on this practice, known as revving.